ASML is overvalued; current price requires sustained profit growth that is too risky, leading to low expected long-term returns.

The next company, ASML, another AI machine manufacturer, has done really well over the past year and a half, more than doubling in value. The price-to-earnings ratio is now 60. It was in the twenties.

If you look at this from the perspective of March 2025, look, ASML is a bit riskier, but it offers a 12% return. Now, it is priced as a buy-as-a-business because the price has gone up, but the company is still the same.

If we discuss the outlook, it has improved slightly on the positive side of their long-term outlook.

When I do the math, it's 60 billion in revenue by 2030, or 60 and something. Profitability, net profit margin 30%, i.e. 20 billion. To justify the current market value of 610 billion, when they reach 20 billion, they need to double the net profit again and then double it again to give you a good return.

So, what has been priced in is one doubling after another for the next fifteen or twenty years. This is too risky, and it's a bit crazy to pay a P/E ratio of 60.

We also have ASML. You can download this for free from the link in the description below in my free course. Here are some scenarios that we will discuss for most companies during this overview.

Earnings per share: how much growth do they need to justify the current share price? Where should the price-to-earnings ratio be? They need to continue growing at 15% annually, and their price-to-earnings ratio needs to be at 40, which is a little high.

Let's make it 25, and then you'll see that it's expensive now at 1600 compared to its intrinsic value. Prosperous times, 20 % growth every year for the next ten years. Okay, a future price-to-earnings ratio of 30.

Present value, okay. This is what was priced. Slower growth rate, still a good price-to-earnings ratio where we were a year ago. This is not linear, and this is not predictive.

This is acceptable. This is interesting. If the market turns negative, that's where I might look at a company. Here I might get a margin of safety. This shows what is being priced now, let's say this is an average.

In short, ASML is extremely expensive and is likely to result in a low long-term return. That's why I put it here, a little more risky than the market as a whole because it's full of artificial intelligence.

Yes, there is an economic trench and everything, but everyone is after them. So, I raised it a little on the risk side, which is less risk because I am changing the risk to market risk.